Drax shares hit by European probe into state aid for biofuel conversion

Josh Martin
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Drax hopes to convert its coal power plant into a biomass burning plant (Source: Getty)

Plans by Drax to convert its North Yorkshire coal power plant to instead burn biomass hit a stumbling block yesterday, when the European Commission (EC) said it will look into whether government subsidies to support the site’s conversion to the fuel amounted to state aid.

Shares in the energy company were burned by the news and ended trading yesterday down 2.33 per cent.

The EC said in a statement that it supported member states’ efforts to increase the use of renewable energy, but EU state aid rules meant the cost of such support for consumers should be limited and it should not give certain utility companies and generators an unfair advantage over competitors.

Drax said the opening of a formal investigation was the next step in the process of obtaining state aid approval and in line with its expectations.

The government aims to close coal-fired power plants by 2025, with nuclear and gas-fired plants complementing renewable energy.

The EC last month approved plans to subsidise the conversion of RWE’s Lynemouth coal-fired power plant to burning biomass, a move seen as positive for Drax.

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